This document summarizes the debate around regulating the payday lending industry in the United States. It outlines the Consumer Financial Protection Bureau's proposed regulations to curb predatory lending practices and establish consumer protections. It also discusses opposing legislation, the Consumer Protection and Choice Act, which would weaken the CFPB's authority. The document examines arguments from supporters of reform who see payday loans as debt traps, as well as counterarguments from opponents who believe regulation limits access to credit. Case studies from states with differing regulatory approaches are also considered.
The New CFPB, New Simplified Disclosures & How Your Credit Union Will Be Affe...NAFCU Services Corporation
On July 21, 2011, the Dodd-Frank Act’s Consumer Financial Protection Bureau assumed its oversight and enforcement powers over the nation’s financial institutions. Changes include new and revised compliance disclosures, which will have a significant impact on credit unions. In this 2011 NAFCU Annual Conference session discover how your credit union can overcome these and other challenges, including those related to the new Privacy and Risk-based pricing notice requirements that took effect on January 1, 2011. Plus, be prepared for the new trend of simplified disclosure requirements that is likely to follow.
Presented by Ted Dreyer, Senior Attorney, Wolters Kluwer Financial Services
More info at http://www.nafcu.org/wkfs
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Take an in depth look at the bankruptcy trends in Virginia, as well as find out more about the types of bankruptcy options. For more visit http://www.tbrclaw.com
The New CFPB, New Simplified Disclosures & How Your Credit Union Will Be Affe...NAFCU Services Corporation
On July 21, 2011, the Dodd-Frank Act’s Consumer Financial Protection Bureau assumed its oversight and enforcement powers over the nation’s financial institutions. Changes include new and revised compliance disclosures, which will have a significant impact on credit unions. In this 2011 NAFCU Annual Conference session discover how your credit union can overcome these and other challenges, including those related to the new Privacy and Risk-based pricing notice requirements that took effect on January 1, 2011. Plus, be prepared for the new trend of simplified disclosure requirements that is likely to follow.
Presented by Ted Dreyer, Senior Attorney, Wolters Kluwer Financial Services
More info at http://www.nafcu.org/wkfs
Presenting this set of slides with name - Credit Unions Powerpoint Presentation Slides. This PPT deck displays fourty two slides with in depth research. Our topic oriented Credit Unions Powerpoint Presentation Slides presentation deck is a helpful tool to plan, prepare, document and analyse the topic with a clear approach. We provide a ready to use deck with all sorts of relevant topics subtopics templates, charts and graphs, overviews, analysis templates. Outline all the important aspects without any hassle. It showcases of all kind of editable templates infographs for an inclusive and comprehensive Credit Unions Powerpoint Presentation Slides presentation. Professionals, managers, individual and team involved in any company organization from any field can use them as per requirement.
Here's a quick overview of Credit Unions for anyone who would like to understand this type of financial services firm. Member owned, with products that are typical to banks. Perfect introduction to use for new customers. We can add to or modify this presentation for any credit union that would like a custom version for educating community groups. Contact us 316 680 6482.
Take an in depth look at the bankruptcy trends in Virginia, as well as find out more about the types of bankruptcy options. For more visit http://www.tbrclaw.com
While there are increasing signs of a recovery from the Great Recession, years of economic progress have vanished for many African Americans and Hispanics in particular, and home ownership remains largely out of reach. That has put new energy into efforts to ensure that the economic turnaround is more inclusive.
“The CFPB’s work in the area of fair lending is a priority and has only just begun,” the agency declared. In this presentation, we walk you through some of its biggest impacts.
To learn how you can stay current in today’s rapidly changing banking and financial industries, visit http://www.lexisnexis.com/banking.
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The financial market felt a significant shake down as the Financial Conduct Authority introduced new payday loan directions for standardizing high cost short term credit. http://www.trueblueloans.co.uk
In response to the financial crisis of 2008, the Dodd-Frank Act included the creation of the Consumer Financial Protection Bureau (CFPB) to ensure that banks, lenders, and financial companies treat consumers fairly by providing greater protection and establishing rights to consumers of financial products. Is that purpose and role now in jeopardy?
Controlling the Growth of Payday Lending Through Local O.docxdickonsondorris
Controlling the Growth of Payday Lending
Through Local Ordinances and Resolutions
A Guide for Advocacy Groups and Government Officials
October 2012
Written By:
Kelly Griffith, Co-Director
Southwest Center for Economic Integrity
[email protected]
Linda Hilton, Director
Coalition of Religious Communities
Crossroads Urban Center - Utah
[email protected]
Lynn Drysdale, Staff Attorney
Jacksonville Area Legal Aid - Florida
[email protected]
Preface
Neighborhoods across America are witnessing the resurgence of predatory small loan operations.
In the last twenty years or so, payday lenders have exploited deregulated interest rates, won special
treatment from state legislatures, or designed products that slip through legislative or regulatory
loopholes. As a result, payday lending legally operates in 32 states, while 18 states either prohibit it,
curb it with rate caps, or have other restrictions that disrupt the payday loan business model costing
consumers as much as $7.46 billion a year in interest for over $44 billion in loans from both storefront
and online lenders. Payday loans cost cash-strapped borrowers triple- digit interest rates, trap borrowers
in repeat loans, foster coercive debt collection practices, and endanger bank account ownership for
families that live on the financial edge.
Payday lending has become increasingly controversial as the consequences of this defective
financial product have become painfully apparent. Payday lenders now outnumber Starbucks and
Burger King outlets across the country. Billions of dollars in usurious interest flows out of communities
to the national chain lenders. Mapping of payday loan locations by neighborhood characteristics and
studies of payday loan use issued by regulators and academics document that these high cost loans
disproportionately harm minority families and low to moderate-income borrowers. (For more
information, please visit Consumer Federation of America's www.paydayloaninfo.org)
Local leaders see the impact of payday lending on economic development, requests for financial
assistance, and financial distress in communities with high levels of low-to-moderate income and
minority families. While industry lobbying and campaign contributions have thwarted reform in many
state legislatures, local officials are taking action to stop payday lenders from exploiting their
neighborhoods by enacting restrictive zoning requirements and local ordinances.
Local policymakers interested in preventing predatory payday lending can also lend their support
to state-level reform efforts to cap annual interest rates at an all-inclusive 36 percent or repeal payday
loan authorization outright. As documented in North Carolina, reinstating small loan caps allows
responsible credit to flow, while saving consumers the billions of dollars now lost to predatory payday
lenders. Resolutions urging state legisla.
A Primer on the Amendments introduced in the U.S. House to undermine the creation of a much-needed Consumer Financial Protection Agency, in the Wall Street Reform and Consumer Protection Act.
1. Jessen-Howard1
To: U.S. Senator Joe Donnelly
From: Steven Jessen-Howard
Subject: Payday Lending Reform: Consumer Financial Protection Bureau proposed regulations
and HR 4018: The Consumer Protection and Choice Act
4/27/16
Overview
Payday lending has become a 50 billion dollar industry in America1, as nearly one in six
American households have taken out a payday loan2. In fact, there are more payday lending
storefronts than McDonald’s chains in the U.S.3 Payday lenders provide customers with small
cash loans, averaging $3504, in exchange for checks to be cashed when customers receive their
next paycheck. These loans are used primarily by lower-income individuals – the mean payday
borrower makes $22,476 a year5 – who would not typically qualify for other types of loans.
Payday loans are generally advertised as quick fixes to temporary economic problems, but most
borrowers have trouble paying off their loans on time. The average payday loan borrower ends
up taking out 10 loans and paying 391% in interest and fees6. In fact, only 2% of payday loans
are given to one-time-only borrowers7. For this reason, many consider payday lending to be a
“debt trap” and claim that federal regulation of payday lending is required to protect borrowers
from becoming caught in cycles of debt.
Legislation
The American payday lending industry emerged in the 1990s, so there is little previous
legislation regarding payday loans, especially on a federal level. One exception to this is the
1 Pew CharitableTrusts
2 The Atlantic
3 Ibid
4 NBC News/Pew
5 NBC News
6 U.S. PIRG
7Center for ResponsibleLending
2. Jessen-Howard2
2007 Military Lending Act, which imposed an interest cap of 36% on some types of consumer
loans, including payday loans8. For the most part, states have held the power in terms of
regulating payday lenders. While states have usury laws limiting interest rates that lenders are
permitted to charge, payday lenders often avoid them by defining their interest charges as
“service fees.9” Some states have laws to specifically address payday lenders. Fifteen, including
New York and Pennsylvania, do not allow any payday loan storefronts. Nine states, including
Florida and Colorado, allow payday lending, but maintain regulations on the industry such as
limits on interest rates and fees. The other thirty-five states have little or no regulation on payday
lenders, allowing them to offer single-repayment loans with APRs of 391% or higher10.
The 2010 Dodd-Frank Act, passed in response to the economic crash of 2008, created the
Consumer Financial Protection Bureau (CFPB), a federal agency whose sole goal is to protect
the financial interests of American consumers from fraudulent and/or exploitative business
practices. While only states have the power to regulate maximum interest rates or fees, the CFPB
has the power to establish federal regulations on payday lenders11, and does not need
Congressional approval to do so.
The CFPB has announced that it will be releasing a set of federal regulations on the
payday lending industry this spring or summer12. The agency has released drafts of these
regulations which would force lenders to adhere to a set or “prevention,” and/or “protection”
requirements, as well as restricting lenders from attempting to collect payment from consumers’
bank accounts in ways that tend to incur excessive fees. Prevention rules require payday lenders
8 Congress.gov
9 Pew CharitableTrusts
10 Pew CharitableTrusts
11 CFPB
12 These restrictions will also apply to a few other types of small loanssuch asvehicletitleloans,butthis memo will
focus on payday loans.
3. Jessen-Howard3
to verify that potential borrowers have the ability to repay loans in a timely manner. Protection
rules include placing limits on the amount of time lenders allow borrowers to roll over their loans
and remain in debt, and requiring lenders to offer borrowers affordable paths out of debt13.
Opponents of the CFPB’s plans drafted the Consumer Protection and Choice Act (CPCA)
in response to the proposed regulations. The CPCA would allow states that have existing laws
regulating the payday lending industry that meet a certain standard to be exempt from any
regulations issued by the CFPB14. The standards described by the CPCA limit the interest rates
and fees that payday lenders are allowed to charge, but do not include the restrictions such as
verifying ability to repay loans that the CFPB is considering to impose. If the CPCA passes, it is
likely that states currently without payday lending restrictions will pass legislation allowing them
to meet the minimum requirements to avoid being subject to CFPB regulations. This would
remove most of the meaningful impact of CFPB proposals.
Support for Increased Federal Regulation:
A wide variety of interest groups have supported increased regulation of payday lenders.
These primarily grassroots efforts in support of the CFPB regulations and opposed to the CPCA
are often led by consumer protection and financial reform groups such as the U.S. Public Interest
Research Group, Americans for Financial Reform, and the Center for Responsible Lending.
However, a wide variety of groups have voiced their support for “ending the debt trap.”
Typically citing moral concerns with profiting from indebting others, such groups include the
U.S. Conference of Catholic Bishops and other faith leaders who banded together to form the
group Faith for Just Lending. Representing two groups who take out a disproportionate number
of payday loans, the NAACP and National Council of La Raza have also stated support for
13 CFPB
14 Congress.gov
4. Jessen-Howard4
CFPB efforts to regulate lenders. Furthermore, many labor organizations such as the AFL-CIO
and American Federation of Teachers have supported the CFPB15. Many veterans have also been
vocal advocates for lending regulation, citing the Military Lending Act and arguing that veterans
should receive the same safeguards that active service members do. Many of these groups have
helped organize individuals to protest at payday lending storefronts and lawmaking chambers, as
well as sign petitions and send letters to their representatives. The large range of support groups
is reflected in broad public support for proposed regulations. Pew Research found that 75% of
American adults say that they want payday loans to be more regulated, and no aspect of the
regulations outlined in the CFPB’s draft received less than 68% support from the same survey
group16. In the political realm, most Democrats support the CFPB’s planned legislation, echoing
the concerns of excessive interest rates and fees that place an undue burden of debt on
economically vulnerable individuals. President Obama has been a vocal critic of payday lending
practices, and would almost certainly veto the CPCA if it passes while he remains in office.
While some Republicans have also expressed their support for reforming payday lending
practices, most believe regulation should come from the state level, and none have endorsed the
CFPB’s proposed rules.
Opposition to Federal Regulation
The CFPB’s regulation proposals have met strong opposition, particularly from
Republicans and the payday lending industry. While the majority of politicians opposed to the
reforms are Republicans, several Democrats also support the CPCA. Democratic National
Committee chairwoman Debbie Wasserman-Schultz is one of nine Democratic co-sponsors of
the bill. Not surprisingly, the payday lending industry and its employees strongly oppose any
15 Americans for Financial Reform
16 Pew
5. Jessen-Howard5
kind of regulation. The industry has spent millions in campaign contributions, primarily to
Republicans, and lobbying efforts to avoid regulation17. While they constitute a minority, a
significant number of payday loan customers also oppose regulation of the industry. These
opponents of regulation often express concerns that imposing restrictions on lenders would put
them out of business, leaving individuals in need of short-term loans with no access to needed
temporary funds. Furthermore, many worry about the issue of government patronization. They
argue that if consumers are willing to take a loan, the government should not undermine these
desired transactions by requiring borrowers to prove their ability to repay the loan.
In addition, the CFPB itself is a central focus of opposition, especially from Republicans.
Ever since its proposal, the CFPB has faced massive dissent from Republicans, who criticize its
lack of congressional oversight and increased federal involvement in the financial sector18.
Seeing as the vast majority of Republicans support legislature to eliminate the CFPB outright, it
is unlikely that they would support any actions of the agency.
Case Study: Colorado
Colorado provides a window into the effects of regulations somewhat similar to CFPB
proposals. In 2010, Colorado implemented payday lending reform that reduced acceptable fees,
extended the minimum term of loans, and required loans to be repayable over time, rather than
coming due all at once19. According to Pew, the effects of this reform resulted in the closing of
half of Colorado’s payday stores, but the remaining stores almost doubled their customer
volume, and payday borrowers are now paying 42 percent less in fees and defaulting less
frequently, with no reduction in access to credit20. The general consensus is that Colorado’s
17 HuffPost
18 Various sources includingU.S. PIRG
19 The Atlantic
20 Ibid
6. Jessen-Howard6
regulations were successful in protecting consumers without removing their ability to receive
short-term loans.
Further Complexities
While regulations could lead to lower fees and costs for borrowers, payday lenders have
found ways around them in the past that allowed them to continue the practices that regulations
aimed to end. For example, when Illinois enacted regulations for lenders that provided loans of
120 days or less, lending companies simply began offering 121 day loans. Similarly, after Ohio
passed legislation regulating companies licensed as short-term lenders, there were soon no
businesses licensed in the state as short-term lenders, and a sudden increase in businesses
licensed as mortgage lenders, as payday lenders reclassified themselves and began offering
“short-term mortgages” of around $30021. It is possible that if CFPB, or stricter state-level
restrictions are enacted, loan companies would exploit similar loopholes allowing them to
effectively avoid regulation.
Another important consideration is maintaining the availability of short-term loans to
individuals currently served by the payday lending industry. The volume of the industry, even
with annual interest rates that often near 400%, demonstrates that there is a high demand for such
loans. If regulations are enacted and cause payday storefronts to close, there may be a shortage of
such loans. Few companies are willing to offer these loans, as the smaller sums of money offer
relatively lower margins, and the higher percentage of defaults on such loans means they carry
higher risk. Legislators such as CFPB mastermind Elizabeth Warren and Democratic presidential
candidate Bernie Sanders have advocated pressuring larger banks into offering such loans,
claiming that their large existing overhead would allow them to do so with minimal losses.
21 Last Week Tonight with John Oliver.
7. Jessen-Howard7
Furthermore, Warren and Sanders have suggested partnering the United States Postal Service
(USPS) with banks in order to offer short-term loans and other basic banking services to
otherwise underserved communities22. While this policy could expand important lending services
to poor communities often neglected by banks, it seems unlikely to be considered for the time
being. Even many payday lending opponents oppose this idea, claiming that it would require a
massively expensive restructuring of the entire USPS23.
Policy Recommendations
Because of the number of payday borrowers who find themselves in a cycle of debt, paying
enormous fees and interest rates, I would recommend voting against the CPCA and supporting
the CFPB’s proposed regulations. States such as Colorado demonstrate that regulation can help
consumers without limiting their access to loan services. Furthermore, more investigation into
providing alternative sources of short-term loans to low-income individuals is necessary. I also
believe that it is important to address the root causes of the demand for such loans. 47% of
Americans state that they "can’t pay for an unexpected $400 expense through savings or credit
cards without selling something or borrowing money24." As long as this is the case, there will be
a large market for payday loans. Enacting legislation allowing more American families to meet
expenses without needing loans is important to mitigate payday lending controversy.
22 http://thinkprogress.org/economy/2014/02/03/3239261/elizabeth-warren-post-office-financial-services/
23 The Atlantic
24 Politifact
8. Jessen-Howard8
Works Cited
Americans for Financial Reform. Feb 2015. “CFPB Sign-on Letter.”
http://ourfinancialsecurity.org/wp-content/uploads/2015/03/AFR-CFPB-Sign-on-Letter-
2.27.15.pdf
Congress.gov “H.R.4018 - Consumer Protection and Choice Act.”
https://www.congress.gov/bill/114th-congress/house-bill/4018%20-
Consumer Financial Protection Bureau. “Factsheet: The CFPB considers proposal to end payday
debt traps.” http://files.consumerfinance.gov/f/201503_cfpb-proposal-under-
consideration.pdf
Cox, Jeff. Nov 2014. “There Are More Payday Lenders in U.S. Than McDonald's” NBC News.
Frisch. Karl. Nov 2015. “Payday Lenders Hoping for a Grand Old Party in 2016.” Huffington
Post.
Greenberg, Jon. June 2015. “47% say they lack ready cash to pay a surprise $400 bill” Politifact.
McClean, Bethany. April 2016. “Payday Lending: Will Anything Better Replace It?” The
Atlantic.
Oliver, John. 2015. “Predatory Lending.” Last Week Tonight. YouTube video.
Pew Charitable Trusts. “Payday Lending in America.” http://www.pewtrusts.org/en/research-
and-analysis/collections/2014/12/payday-lending-in-america
Pyke, Alan. Feb 14. “Elizabeth Warren Proposes Replacing Payday Lenders with The Post
Office.” ThinkProgress.